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Burbank Blog

A few home truths about building a home and all that surrounds it.

The First Home Loan Deposit Scheme Explained

05/10/2020


Some of our customers have advised that the First Home Loan Deposit Scheme can be a bit confusing so here is a guide to help you into your first Burbank home…

How does it work?

The scheme, is aimed at helping first-home buyers get a faster leg up on the property ladder by avoiding paying lenders’ mortgage insurance, even with a deposit as low as 5 per cent.
 
Lenders mortgage insurance is a form of insurance that the lender takes out to cover the risk of the borrower being unable to repay the mortgage. They of course then charge the borrower.
 
Most banks and lenders require a minimum deposit of 20 per cent of the property’s value for the borrower to be exempt from lenders mortgage insurance so getting access to the new government scheme can make a big difference – the government says you could save around $10,000.
 
Under the scheme, the Government goes guarantor for the rest of the deposit, in effect allowing people to take out low-deposit loans and not spend extra years saving for a 20 per cent deposit.
 
The lender will still do their normal checks on your financial situation.

Who is eligible?

The First Home Loan Deposit Scheme is exclusively for first home buyers who are current Australian citizens and meet the scheme's eligibility criteria.  There is also a price cap on the value of homes that can be purchased. Homes worth up to $950,000 are eligible in Sydney, while the cut-off is $850,000 in Melbourne, $650,000 for Brisbane, $600,000 in Canberra and $550,000 in Adelaide. The caps outside the capital cities are significantly lower. See full details below for the states we build in.
 
There is also a cap on the income of the purchaser. For singles the income cap is $125,000 and $200,000 for couples.
 
State/ Territory Capital City / Regional Centre Rest of the state
VIC $850,000 $550,000
NSW $950,000 $600,000
ACT $600,000 N/A
QLD $650,000 $500,000
SA $550,000 $400,000
Source: Housing Minister and Assistant Treasurer
 

How many people can access the scheme? 

Earlier this year, it was announced only 10,000 of these loans are available nationwide each financial year. However, recently the Federal government opened up another 10,000 places to support first home buyers and drive more construction to support jobs as the economy recovers from the COVID-19 pandemic recession.
 
The next 10,000 places will open up on the 6th of October and be available until June 30 next year.
 
If you’re wanting to take advantage of the program, you’ll have to act fast!  Earlier this year when the scheme commenced within its first six weeks more than half of the 10,000 places were filled so if you’re interested be sure to start the application process today.
 
All this means is that a relatively small number of people will benefit from the scheme because overall more than 110,000 first homes were bought nationally in 2018. Basically, you have a one in 10 chance of being successful.
 

How to apply 

The scheme is administered by the National Housing Finance and Investment Corporation and applications will need to be made through this institution.
 
To get started chat to one of our New Home Consultants who can set you up with a free consultation with a home loan expert from our finance partners.
 
Don’t miss out! Call 13BURBANK or head to our contact us section and enquire today.

Other things you should be aware of

The government’s First Home Loan Deposit Scheme can also be used alongside other Grants and stamp duty concessions. Including the $25K Homebuilder Grant, First Home Buyer Grants and the First Home Super Saver Scheme.